German lawyers walk out from EY, PwC firms

The Sarbanes-Oxley Act has had dramatic effects at two accountancy-tied law firms in Germany, both of which experienced significant fallout last week.
The German arm of the Ernst & Young (EY) network has suffered a series of walkouts just as the firm has voted to join the EY Law Alliance.
The 11-partner Bochum office of EY-tied firm Luther Menold will split from the firm over strategic differences, with further whole-office defections possible, according to sources. EY-tied firms have been told that unless they vote to join the EY Law Alliance, they should quit the network.
Luther Menold’s 20-lawyer Bochum office is part of EY’s legacy law firm Menold & Aulinger, which merged with Andersen Luther last year after the collapse of Andersen Legal. The partners, including name partner Leonhard Aulinger, are expected to form an independent law firm.
Luther Menold has just lost a team of Frankfurt lawyers to DLA alliance partner Gorg, as reported on www.thelawyer.com/lawyer news last week. Three partners and a number of associates and support staff have defected. The EY-tied firm has also lost a number of Frankfurt lawyers to Latham & Watkins.
Last week the firm voted resoundingly to join the EY Law Alliance, a network of European law firms that will be an integral part of EY’s non-audit tax and consultancy business.
According to Luther Menold managing partner Stefan Kraus, 90 per cent of partners approved the alliance at a vote last Wednesday (2 July). He declined to comment on the departure of the Bochum office or on whether other legacy Menold & Aulinger offices might follow.
Regulatory uncertainty has also taken its toll at PricewaterhouseCoopers (PwC) Veltins.
As revealed on www. thelawyer.com/lawyernews last week, the firm lost its founding partner Michael Veltins to US firm Wilkinson Barker Knauer. His departure follows partner de-equitisations and staff cuts, which have seen the firm shrink from over 160 lawyers to around 100 in just under two years.
The new head of PwC Veltins Thomas Kerkoff told The Lawyer that the firm is likely to break all major ties with PwC – an almost inevitable move given the strength of PwC’s Securities and Exchange Commission-registered audit client base.
Partners at PwC Veltins look set to vote on a buyout from the accountants later this year, with a strategic alliance with a UK or US firm also under discussion.
However, the firm is riven with strategical disagreements, with a senior source at PwC claiming the Munich and Düsseldorf offices are at odds with the firm’s strategy of independence from PwC.
Kerkoff denied that the Munich and Düsseldorf offices were negotiating an exit, but conceded that there had been discussions over whether the offices, both from German rival Heuking Kühn Lüer Heussen Wojtek, might be spun off.
Kerkoff said: “We had a strategic workshop and all scenarios were put on the table, including that. We also discussed whether the firm could become an in-house legal department at PwC.”